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Overview
In Asia’s latest economic readouts, China’s July data show mixed momentum. Home prices fell 2.8% year-on-year, slowing from June’s drop, hinting at tentative stabilization but with property weakness still weighing on sentiment. Retail sales growth eased to 3.7%, fixed-asset investment slowed to 1.6%, and industrial output rose 5.7%, slightly missing forecasts. Consumer confidence improved, yet unemployment ticked up to 5.2%, underscoring an uneven recovery.
Over in Japan, August brought a risk-on shift in capital flows. Domestic investors returned to foreign bonds, while overseas buyers boosted Japanese equity purchases. Q2 GDP beat expectations at 0.3% q/q, driven by stronger capex and exports. Consumer sentiment continued to climb, and industrial production rebounded 2.1% in June, pointing to steady, if modest, manufacturing momentum.
Japan Economic & Market Update – August 2025
Japan’s latest data signal a modestly improving economic and market backdrop. Weekly flows showed a risk-on shift, with domestic investors buying ¥254.9bn in foreign bonds (vs. the prior week’s net selling) and overseas investors sharply increasing purchases of Japanese equities to ¥489.3bn, supported by resilient corporate earnings and portfolio rebalancing amid firmer global yields.
Q2 GDP grew 0.3% q/q (1.0% y/y), beating forecasts as capex (+1.3% q/q) and exports (+0.3 ppt contribution) strengthened, while private consumption held steady (+0.2%). The GDP price index eased to 3.0% y/y, hinting at cooling inflation.
Consumer confidence also improved, with the PCSI rising to 37.21 in August, reflecting firmer wages, easing energy costs, and a steadier job outlook—though still below neutral.
Industrial production rebounded 2.1% m/m in June, but capacity utilization slipped 1.8%, suggesting stable manufacturing momentum into Q3 without overheating.
China Economic Update – July 2025
China’s July economic data showed a loss of momentum across key sectors, with some signs of stabilization but persistent structural weaknesses. Nationwide home prices fell 2.8% y/y, easing from –3.2% in June as targeted easing measures and mortgage-rate cuts began to filter through, though the property market remains fragile amid developer funding pressures, cautious buyer sentiment, and high inventories in smaller cities. Fixed-asset investment growth slowed to 1.6% y/y, missing forecasts and reflecting continued drag from property and manufacturing, with infrastructure spending failing to fully offset the weakness. Retail sales rose 3.7% y/y, below both expectations and June’s pace, as discretionary spending stayed muted under the weight of a soft property sector and uneven labor gains, while essentials held firmer; year-to-date growth eased to 3.84%. Consumer confidence improved modestly, with the PCSI index climbing to 72.42 in August, hinting at firmer views on personal finances and job prospects that could support services and travel demand. Industrial production increased 5.7% y/y, below forecasts and down from 6.8% in June, as resilience in autos, electronics, and energy equipment was offset by weaker external demand and property-linked supply chains. The labor market also softened, with the surveyed urban unemployment rate edging up to 5.2% from 5.0%, signaling cooling labor demand in services, construction, and manufacturing, which may continue to weigh on household spending.
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